Online fashion marketplace Otrium has raised €24m to help sell the billions worth of designer clothes piling up unsold in warehouses due to coronavirus.
The five-year-old Dutch company helps clothing brands sell end-of-season collections that would otherwise go unsold. Typically this is around 10% of a brand’s seasonal production.
But at the moment, according to McKinsey, excess inventory is double the usual as spending has declined. Spring/summer collections languishing in warehouses this year are worth as much as €160bn around the world and €60bn in Europe alone.
Announcing the raise on Wednesday, Otrium cofounder Milan Daniels said: “We’re committed to helping our partners get the most value out of their last season’s collections, and we realise that this need has never been greater.”
The round is being led by Eight Roads Ventures, which is also an investor in Alibaba, Treatwell and Made.com. Existing investors in Otrium, Index Ventures and Hans Veldhuizen, also participated in the Series B round.
The money will be used to fuel international expansion, according to the company, which also announced that it is now launching in the UK.
Move over Vente Privee
Daniels and his cofounder Max Klijnstra, who met at primary school, came up with the idea for Otrium when they sold their clothing brand Breaking Rocks in 2015.
After the sale, they needed to shift €100,000 worth of unwanted stock from their warehouse and say that they were “shocked” by how little they could get for it.
So they came up with an approach which they say is better than that of flash sales companies such as Vente Privee because it gives brands more control over what and how they sell.
Otrium is in some ways akin to a Shopify for fashion brands, providing the e-commerce technology stack and logistics handling to create online clearance stores.
Brands, therefore, have the power over pricing, the number of items they are selling and for how long. This can help get over the discounting issue, which can be a tricky one. Knock off too much and you can damage the value of the brand. Some labels such as Burberry burn their excess stock rather than sell it.
With the lure of more control, Otrium has won over 200 brands, including Joseph, Reiss, G-Star, Asics, Puma, Vans, Pepe Jeans and Scotch & Soda. This is compared to 100 last year. There are now one million registered Otrium shoppers, according to the company, up from 600,000 a year ago.
The fashion industry has been sent into convulsions by the coronavirus pandemic and many predict (and hope) that it will emerge a different beast from the other side.
Flora Davidson, cofounder of fashion supply chain management platform SupplyCompass, thinks that coronavirus will finally make the industry take sustainability seriously.
“Now is the time for the fashion industry to take a good hard look at itself — and an opportunity for it to emerge on the other side of this crisis in a smarter, more sustainable shape than ever,” she writes in Sifted.
Meanwhile, Vestiaire Collective raised €59m in April to enhance its platform for buying and selling second-hand clothes and handbags, saying it has benefited from consumers wanting a bargain during coronavirus.
Vestiaire Collective is part of the so-called “circular fashion” trend. Instead of buying new and throwing away, the idea is that consumers will invest in more durable, high-end products that they can wear for a bit and then sell to others.
Both Otrium and Vestiaire Collective are hoping the circular fashion trend is accelerated post-lockdown.
Consulting firm Bain & Company estimates sales in the luxury sector could fall by as much as 35% this year. For Otrium, that could mean just more stock for them to help sell at a discount.